Attachment Narrative SAT-MOD-20111216-00240

Attachment Narrative

This document pretains to SAT-MOD-20111216-00240 for Modification on a Satellite Space Stations filing.

IBFS_SATMOD2011121600240_930004

Summary

115 License Subsidiary, LLC (“LicenseSub”) requests that the Commission grant an

extension or waiver of LicenseSub’s commencement of construction milestone. LicenseSub has

met the requirements specified by the Commission for its prior two milestones, but the

International Bureau (“Bureau”) still has not ruled on LicenseSub’s compliance, despite having

years to review LicenseSub’s milestone submissions. The Bureau has also failed to take even the

most basic administrative step of placing LicenseSub’s transfer of control application on public

notice, although it has been pending for nearly six months. These extraordinary delays and

improper actions, which are beyond LicenseSub’s control, have created regulatory uncertainty

regarding LicenseSub’s satellite authorization and, consistent with the precedent established in

Netsat 28, warrant extension or waiver of LicenseSub’s commencement of construction

milestone.

Independent of the Commission’s determination regarding LicenseSub’s extension

request, the company requests that the Commission consent to the withdrawal and unconditional

release of LicenseSub’s satellite performance bond. Experience over the last eight years in the

17/24 GHz band shows that the satisfaction of the bond requirement is not determinative of

whether a licensee implements its system, invalidating an underlying justification for the bond

requirement. To the extent there is any benefit to the bond requirement in deterring speculative

applications and warehousing, it is outweighed by the substantial impediment it presents to

satellite entrepreneurs seeking to develop the otherwise fallow spectrum.

The recent surrender of several 17/24 GHz licenses by DIRECTV and EchoStar, as a

result of concerns regarding International Telecommunication Union priority, highlights the fact

that there are orbital locations available for Commission assignment. There are also ample

Commission requirements in place to address any concerns regarding speculation and

warehousing. Thus, there is simply no need to further discourage entrepreneurs from applying to

use the 17/24 GHz spectrum. Indeed, in light of the current economic crisis, the Commission

should be doing all in its power to encourage applications that could lead to the creation of the

new businesses, services, and jobs. The Commission should not be enforcing a requirement that

encumbers tens of millions of dollars, preventing the productive use of those funds in stimulating

an ailing economy. Moreover, eliminating the bond requirement actually reduces the potential

for warehousing by removing a primary incentive for a licensee to seek to maintain its license

through waiver or extension, if it has not met its milestone, or to litigate an adverse Commission

milestone assessment. For these reasons, LicenseSub requests that the Commission reevaluate

the need for the performance bond requirement and consent to the withdrawal and unconditional

release of LicenseSub’s bond.

ii

Table of Contents

Summary......................................................................................................................................... i

Background ....................................................................................................................................1

Discussion........................................................................................................................................6

I. The Commission should grant an extension or waiver of LicenseSub’s
milestone requirement to commence physical construction ................................................6

A. The Bureau’s ongoing delay in ruling on LicenseSub’s compliance
with its initial two milestones has prejudiced LicenseSub’s ability
to attract investment.................................................................................................8

1. The evidence shows that LicenseSub has met its milestones
to execute a non-contingent satellite construction contract
and complete CDR.......................................................................................8

2. The Bureau’s requests for additional information regarding
the Company’s post-milestone date actions for purposes of
assessing the Company’s compliance with past milestones
were improper and prejudicial ...................................................................11

B. The Bureau’s ongoing failure to place the transfer of control
application on public notice after nearly six months is
extraordinary and has prejudiced LicenseSub’s ability to attract
investment ..............................................................................................................13

C. Grant of an extension or waiver would not undermine the
Commission’s policy objective to prevent speculation and
spectrum warehousing and would serve the public interest...................................15

II. Independent of the Commission’s determination regarding LicenseSub’s
extension request, the Commission should consent to the withdrawal and
unconditional release of LicenseSub’s satellite performance bond...................................17

A. Satisfaction of the bond requirement is not determinative of
whether a licensee implements its system .............................................................18

B. Any benefit of the bond requirement in deterring speculative
applications and warehousing is outweighed by the impediment it
presents to satellite entrepreneurs seeking to develop the otherwise
fallow spectrum......................................................................................................20

iii

Before the
Federal Communications Commission
Washington, D.C. 20554

In the Matter of )
) File No._______________
115 License Subsidiary, LLC ) Call Sign S2700
)

REQUEST FOR EXTENSION OF MILESTONE

115 License Subsidiary, LLC (“LicenseSub” or the “Company”) hereby requests that the

Commission grant LicenseSub an extension or, in the alternative, a waiver of the commence

physical construction milestone applicable to the above-referenced licensed satellite system.

Additionally, LicenseSub requests that the Commission consent to the withdrawal and

unconditional release of LicenseSub’s satellite performance bond.

Background

LicenseSub is a Delaware limited liability company. Its ultimate parent, Xanadoo

Company (“Xanadoo”), is the fruition of its founders’ experience over the last twenty five years

building start-up companies dedicated to utilizing advanced technologies to bring new services to

rural and underserved communities. Prior companies started by Xanadoo’s founders include:

• Cable Television de Mayaguez, which built and operated a cable system serving over
500,000 people in Puerto Rico;
• Pegasus Cable Television, which built and operated cable systems in rural Connecticut,
Massachusetts and New Hampshire; and
• Pegasus Satellite Television, the largest independent distributor and servicer of
DIRECTV satellite television services in the United States with over 1.4 million
subscribers and over $800 million in revenue in rural areas of 41 states.

Presently, Xanadoo’s principal operating business, conducted through indirect subsidiaries,

consists of the provision of wireless broadband Internet access services to communities in Texas,

Oklahoma, and Illinois.1

On December 17, 2008, the International Bureau (“Bureau”) granted LicenseSub a

license to launch and operate a 17/24 GHz Broadcasting-Satellite Service space station at the

115.0ºW orbital location.2 Pursuant to the Commission’s rules and the terms of the license,

LicenseSub is required to meet the following satellite construction milestones:

• Execute a binding satellite construction contract by December 17, 2009;

• Complete the Critical Design Review (“CDR”) by December 17, 2010;

• Commence physical construction of the space station by December 17, 2011; and

• Launch and begin operations by December 17, 2013.

The terms of the license also required that (i) LicenseSub post a $3 million performance

bond within 30 days of the license grant date and (ii) complete coordination of the physical

operations of the space station with satellite operators with overlapping station-keeping volumes

by February 17, 2011.3

On January 16, 2009, LicenseSub submitted to the Commission the $3 million

performance bond, as required.4 On December 16, 2009, the Company executed a binding, non-

1
See http://www.xanadoo.com/.
2
See Stamp Grant, File Nos. SAT-LOA-20060412-00044, SAT-AMD-20080114-00023
(December 17, 2008). Pegasus Development DBS Corporation, the direct parent company of
LicenseSub, was the original licensee. Pursuant to the grant and consummation of a pro forma
assignment, the license is now held by LicenseSub. See File No. SAT-ASG-20090921-00098.
3
See id.
4
See Public Notice, Report No. SAT-00576, DA No. 09-173 (January 30, 2009).

2

contingent satellite construction contract (the “Contract”) with Space Systems/Loral Inc.

(“SS/L”) and made the initial payment due under the Contract to SS/L. LicenseSub provided a

complete copy of the Contract to the Commission.5 On April 8, 2010, LicenseSub and SS/L

submitted clarifying information to the Commission confirming the timely submission of the

Company’s initial payment to SS/L.6 On June 2, 2010 and again on August 17, 2010,

LicenseSub filed letters to the Bureau requesting prompt action on the determination of

compliance with LicenseSub’s initial milestone requirement, noting that the Bureau’s delay was

inexplicable and not without real world repercussions, including creating regulatory uncertainty.7

On August 19, 2010, two days after LicenseSub’s request for action, the Bureau issued a

letter seeking additional information regarding the Company’s payments under the Contract

since December 2009, stating that such information would “ensure that [the Commission] ha[s]

an accurate understanding of the mutual obligations created by the contract.”8 The Company

responded, providing detailed payment information regarding the Contract, copies of the

amendments to the Contract, and a letter from SS/L stating the progress it had made under the

Contract, which included conducting a CONUS coverage assessment, analysis of new CONUS

5
See Letter from Bruce D. Jacobs and Tony Lin, Counsel for 115 license Subsidiary, LLC, to
Marlene H. Dortch, Secretary, FCC (December 17, 2009).
6
See Letter from Tony Lin, Counsel to 115 License Subsidiary, LLC, to Marlene H. Dortch,
Secretary, FCC (April 8, 2010).
7
See Letter from Tony Lin, Counsel to 115 License Subsidiary, LLC, to Robert Nelson, Chief,
Satellite Division, International Bureau, FCC (June 2, 2010); Letter from Bruce D. Jacobs and
Tony Lin, Counsel to 115 License Subsidiary, LLC, to Mindel Da La Torre, Chief, International
Bureau, FCC (August 17, 2010).
8
See Letter from Robert Nelson, Chief, Satellite Division, International Bureau, FCC, to Tony
Lin, Counsel to 115 License Subsidiary, LLC (August 19, 2010).

3

beam patterns, and assessment of new system design options.9 On September 30, 2010 and

November 2, 2010, LicenseSub filed supplemental letters to the Bureau indicating that the

Company had continued to make the respective monthly payment under the Contract.10

On December 15, 2010, LicenseSub submitted its showing of compliance with the CDR

milestone.11 The filing contained a soft copy of the CDR report supplied by SS/L and a letter by

SS/L certifying to completion of CDR and receipt of all payments dues under the Contract.12 On

February 16, 2011, the Company notified the Bureau that LicenseSub had satisfied its license

condition requiring completion of coordination of physical operations.13

On July 27, 2011, the Bureau issued another letter to LicenseSub seeking information

regarding: (i) evidence of payments by the Company under the Contract from the period

commencing November 1, 2010; (ii) changes to the Contract, if any; and (iii) supplemental

information regarding the Company’s demonstration of compliance with the CDR milestone.14

As stated in the letter, the Bureau requested the information to facilitate its review of

9
See Letter from Tony Lin, Counsel to 115 License Subsidiary, LLC to Robert Nelson, Chief,
Satellite Division, International Bureau, FCC (August 27, 2010).
10
See Letter from Bruce D. Jacobs and Tony Lin, Counsel to 115 License Subsidiary, LLC to
Robert Nelson, Chief, Satellite Division, International Bureau, FCC (November 2, 2010); Letter
from Bruce D. Jacobs and Tony Lin, Counsel to 115 License Subsidiary, LLC to Robert Nelson,
Chief, Satellite Division, International Bureau, FCC (September 30, 2010).
11
See Letter from Bruce D. Jacobs and Tony Lin, Counsel for 115 License Subsidiary, LLC to
Robert Nelson, Chief, Satellite Division, International Bureau, FCC (December 15, 2010).
12
See id.
13
See Letter from Bruce D. Jacobs and Tony Lin, Counsel for 115 License Subsidiary, LLC to
Robert Nelson, Chief, Satellite Division, International Bureau, FCC (February 16, 2011).
14
See Letter from Robert Nelson, Chief, Satellite Division, International Bureau, FCC, to Tony
Lin, Counsel to 115 License Subsidiary, LLC (July 27, 2011).

4

LicenseSub’s compliance with its milestone requirements to execute a non-contingent satellite

construction contract and to complete CDR.15

On August 26, 2011, LicenseSub responded to the letter providing a chart summarizing

all of the payments made under the Contract, copies of all amendments to the Contract, and

detailed information regarding the CDR design verification activities and electrical and

mechanical analyses conducted, as requested by the Bureau.16 In the response, the Company

expressed its concerns regarding the Bureau’s repeated inquiries into the Company’s post-

milestone date actions under the Contract for purposes of assessing the Company’s compliance

with past milestones and questioned whether the Bureau essentially and impermissibly was

imposing new milestone requirements on LicenseSub.17

The Company also called for the Bureau to take prompt action concluding that

LicenseSub had met its first two milestone requirements.18 The Company noted that it had

submitted an application to transfer control of LicenseSub to Spectrum Five LLC on June 30,

201119 and that there was no basis to delay action on that filing because the transferee had

affirmed that it “understands and accepts” the Company’s existing milestone requirements.20

LicenseSub notified the Bureau that its delay both in reviewing the Company’s compliance with

15
Id. at 1.
16
See Letter from Bruce D. Jacobs and Tony Lin, Counsel to 115 License Subsidiary, LLC, to
Robert Nelson, Chief, Satellite Division, International Bureau, FCC (August 26, 2011).
17
Id. at 2-3.
18
Id. at 3-5.
19
See File No. SAT-T/C-20110630-00124 (filed June 30, 2011).
20
See Letter from Bruce D. Jacobs and Tony Lin, Counsel to 115 License Subsidiary, LLC, to
Robert Nelson, Chief, Satellite Division, International Bureau, FCC, at 4 (August 26, 2011).

5

its milestones and with respect to the transfer of control application created regulatory

uncertainty, imposed unnecessary costs, and hampered the development of the licensed

spectrum.21

Discussion

I. THE COMMISSION SHOULD GRANT AN EXTENSION OR WAIVER
OF LICENSESUB’S MILESTONE REQUIREMENT TO COMMENCE
PHYSICAL CONSTRUCTION

The Commission’s rules permit milestones to be extended if additional time is required

due to unforeseeable circumstances beyond the licensee’s control or there are unique and

overriding public interest concerns that justify an extension.22 Similarly, the Commission’s rules

may be waived if there is “good cause” to do so.23 Waiver is appropriate if: (i) it would not

undermine the policy objective of the rule in question; (ii) it would better serve the public

interest than strict adherence to the general rule; and (iii) the articulated standard for grant of the

waiver is predictable, workable, and not susceptible to discriminatory application.24 The courts

and the Commission have recognized regulatory policy would be undercut if administrative rules

do not “in some way take into account considerations of hardship, equity, or more effective

implementation of overall policy.”25

21
Id. at 5.
22
47 C.F.R. § 25.117(c).
23
See, e.g., Northeast Cellular Tel.Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990)
(“Northeast Cellular”); WAIT Radio v FCC, 418 F.2d 1153, 1157-59 (D.C. Cir. 1969) (“WAIT
Radio”).
24
See Northeast Cellular, 897 F.2d at 1166; WAIT Radio, 418 F.2d at 1157-1159; In the Matter
of Columbia Communications Corp., Memorandum Opinion and Order, 15 FCC Rcd 16496, at ¶
19 (Int’l Bur. 2000) (“Columbia Communications Order”).
25
WAIT Radio, 418 F.2d at 1159.

6

With respect to satellite milestones specifically, the Bureau has acknowledged that where

it has taken action that “made it more difficult than it would have been otherwise for [the

licensee] to attract investors” a waiver and extension of the applicable milestone is justified.26 In

NetSat 28, the Bureau issued a satellite license to NetSat 28 and subsequently, on its own

motion, reconsidered the licensing decision, conditioning it on the outcome of a separate

proceeding involving the character qualifications of one of the licensee’s corporate owners.27

The Commission later determined that the scope of the character qualifications proceeding

should not have included the NetSat 28 corporate owner and removed the condition on NetSat

28’s license.28 NetSat 28 failed to timely meet one of its milestones and sought waiver and

extension of that milestone. Because “NetSat 28 faced hardship as a consequence of a

Commission action,” the Bureau determined that equity considerations justified granting NetSat

28’s waiver and extension requests.29

Here, the Bureau’s inexplicable delay in taking action confirming LicenseSub’s

compliance with its first two milestones, repeated unwarranted and improper inquiries regarding

LicenseSub’s post-milestone date actions for purposes of assessing the Company’s compliance

with past milestones, and failure to take any steps in processing the Company’s pending transfer

of control application cast a cloud of regulatory uncertainty on the Company’s license and justify

26
See In the Matter of NetSat 28 Co., L.L.C., Memorandum Opinion and Order, 16 FCC Rcd
11025, at ¶ 7 (Int’l Bur. 2001) (“NetSat 28”).
27
Id. at ¶¶ 7-8.
28
Id. at ¶ 8.
29
Id. at ¶ 9.

7

extension or, in the alternative, waiver of LicenseSub’s commence physical construction

milestone.

LicenseSub submits that the applicable deadline should be extended for a period of one

year after the Commission has taken action on this request. This will allow sufficient time for

the Company time to remedy the harm caused by the Bureau’s actions.30

A. The Bureau’s ongoing delay in ruling on LicenseSub’s compliance
with its initial two milestones has prejudiced LicenseSub’s ability to
attract investment

LicenseSub submitted its showing of compliance with respect to its execute contract

milestone two years ago and its CDR milestone one year ago, but the Bureau has not reached any

conclusions regarding LicenseSub’s compliance. Instead, the Bureau has repeatedly sought

additional information regarding License’s post-milestone date actions that is irrelevant for

assessing LicenseSub’s compliance with past milestones. Like NetSat 28, the Bureau’s actions

were beyond LicenseSub’s control and created an unnecessary and inappropriate cloud of

uncertainty over the LicenseSub’s license making it more difficult than otherwise to attract

investment. These actions justify grant of an extension or waiver of the commence physical

construction milestone.

1. The evidence shows that LicenseSub has met its milestones to
execute a non-contingent satellite construction contract and
complete CDR

With respect to the execute contract milestone, the Contract as initially executed specifies

in detail the requirement for the construction of a specific satellite and its design characteristics,

30
For the same reasons, a comparable extension of License’s final milestone, requiring launch
and operations of the satellite, would also be warranted. LicenseSub will seek such an extension
at the appropriate time, if necessary.

8

which are materially consistent with the license;31 the Contract sets forth a specific construction

schedule that meets all of the Company’s milestones;32 the Contract requires that the Company

make significant initial payments and the majority of payments well before the end of the

construction period;33 the Contract describes the Company’s payment terms and schedule in

detail;34 and the Contract imposes a significant financial penalty for any cancellation of the

contract.35

With respect to the CDR milestone, the CDR report demonstrates that the Company has

completed all material design work for the Company’s licensed satellite system36 and provides

31
See In the Matter of Joint Application for Review of Constellation Communications Holdings,
Inc, Mobile Communications Holdings, Inc. and ICO Global Communications (Holdings)
Limited, Memorandum Opinion and Order, 19 FCC Rcd 11631, at ¶¶ 8, 10 (2004)
(“Constellation Communications”); In the Matter of Emergency Application for Review and
Request for Stay of Globalstar, L.P., Memorandum Opinion and Order 19 FCC Rcd 11548, at ¶¶
8, 10 (2004) (“Globalstar”); In the Matter of TeledesicLLC Application for Authority to
Construct, Launch, and Operate a Ka-Band Satellite System in the Fixed Satellite Service,
Memorandum Opinion and Order, 17 FCC Rcd 11263, at ¶ 11 (Int’l Bur. 2002) (“Teledesic”)
(“Generally, we look to the statement of work as an element in confirming that the contract is
fully realized and does not leave significant aspects open to further or contingent negotiations on
details.”).
32
See Constellation Communications, at ¶¶ 7, 9, 10 (“[C]ontract must demonstrate that the
licensee is committed to completing the construction of the satellite system within the time
frame specified in the license.”); Globalstar, at ¶¶ 7, 9.
33
See Constellation Communications, at ¶ 9; Globalstar, at ¶ 9.
34
See Constellation Communications, at ¶ 7; Globalstar, at ¶ 7; Teledesic, at ¶ 11 (“[P]ayment
schedule and payment commitments were detailed enough to allow us to conclude that the
parties have a sufficiently realized agreement.”).
35
See In the Matter of Amendment of the Commission’s Space Station Licensing Rules and
Policies, First Report and Order, 18 FCC Rcd 10760, at ¶ 184 (2003) (“Satellite Reform Order”).
36
See In the Matter of EchoStar Corporation, Memorandum Opinion and Order, 26 FCC Rcd
10442, at ¶ 7 (Int’l Bur. 2011) (explaining that at CDR, the design and development phase shall
have ended).

9

evidence of design verification activities and the completion of electrical and mechanical

analyses and simulations unique to the Company’s satellite.37 SS/L also provided a certification

with the CDR filing confirming the construction progress under the contract and satisfaction of

the CDR milestone.38 Although the Company’s contract with SS/L does not require the

Company to order any long lead parts prior to CDR, the delivery schedule both initially and at

the time of the submission of the CDR materials to the FCC met all license milestone deadlines,

and as the Commission has stated, it will grant significant flexibility to licensees in meeting their

milestone requirements.39

The evidence shows that, under the tests specified by the Commission, LicenseSub met

both its milestones to execute a satellite contract and complete CDR. Thus, the Bureau’s

inexplicable, ongoing delay in reaching that conclusion has unnecessarily created a cloud of

regulatory uncertainty regarding the Company’s license, making it more difficult than otherwise

37
Id. (explaining that to demonstrate compliance with the CDR milestone, the licensee should
identify major components of the satellite and show how the components have been integrated
into a functional electrical and mechanical design specific to the satellite). As LicenseSub has
stated previously, a number of subsystems are already flight qualified and therefore tests of the
mechanical and electrical system designs prior to spacecraft assembly are not required.
Similarly, there are no new payload qualification items required under the contract. Indeed,
these are some of the primary advantages of using the SS/L 1300 bus.
38
See Public Notice, Report No. SPB204, DA 04-787 (March 25, 2004) (providing a list of
factors that the Bureau may consider in its review of the CDR milestone, including a certification
from the satellite manufacturer).
39
See Constellation Communications, at ¶ 12 (“Instead of adopting . . . detailed rules requiring
or prohibiting certain contract provisions or types of arrangements, the Commission has adopted
general standards. . . . As a result licensees have more flexibility to consider different
construction and related financing arrangements, as along as they meet the general standards
developed in the Commission’s precedents.”); Globalstar, at ¶ 12.

10

for LicenseSub to attract investment. 40 Under NetSat 28, an extension or waiver of

LicenseSub’s commence physical construction milestone, therefore, is warranted.

2. The Bureau’s requests for additional information regarding
the Company’s post-milestone date actions for purposes of
assessing the Company’s compliance with past milestones were
improper and prejudicial

While the Bureau has general authority to request additional information regarding a

licensee’s compliance with the FCC’s rules, the Bureau’s requests here were improper because

they are fundamentally at odds with the plain meaning of the Commission’s rules and policy that

milestone compliance is assessed as of the date of the applicable milestone.41 Indeed, the

information the Bureau recently requested in August of this year concerning the Company’s

payments under the Contract from November 2010 to August 2011 can have little or no

40
The Bureau’s delay in completing milestone compliance assessments for other 17/24 GHz
licenses does not warrant denial of this request because it does not justify the underlying delay.
Moreover, LicenseSub notes that the impact of Bureau delay may be less detrimental to
established satellite operators that self-finance satellite construction.
41
See 47 C.F.R. §§ 25.164(a), (b) (establishing specific milestone deadlines for all satellite
licenses); 25.164(c) (requiring satellite licensees to submit a binding non-contingent contract on
or before initial milestone deadline); 25.164(d) (requiring satellite licensees to submit
information to demonstrate compliance with CDR milestone on or before milestone deadline);
25.164(e) (requiring satellite licensees to submit information to demonstrate compliance with
commence physical construction milestone on or before milestone deadline); 25.165(c) (“A
licensee will be considered to be in default if it fails to meet any milestone deadline set forth in §
25.164, and, at the time of [sic] milestone deadline, the licensee has not provided a sufficient
basis for extending the milestone.”) (emphasis added); In the Matter of Amendment of the
Commission’s Space Station Licensing Rules and Policies, Notice of Proposed Rulemaking and
First Report and Order, 17 FCC Rcd 3847, at ¶¶ 101 (2002) (explaining that satellite licensees
must “commence construction, complete construction, and launch its satellite by the ‘milestone’
deadlines specified in [the] license.”) (emphasis added); Satellite Reform Order, at ¶¶ 181-85
(“We adopt [the] proposal to require satellite licensees to submit their contracts to the
Commission on or before the date of the contract execution milestone.”) (emphasis added); In
the Matter of Columbia Communications Corporation, Order and Order on Reconsideration, 16
FCC Rcd 10867, at ¶¶ 17-18 (Int’l Bur. 2001) (“Columbia Communications Reconsideration
Order”) (rejecting the argument that Bureau should examine a licensee’s satellite construction
progress in the period between milestone deadlines to ensure continued progress).

11

relevance to whether the Company executed a contract two years ago or completed CDR a year

ago.

The Bureau’s inquiries also appear to focus myopically on contract payments. This is

troublesome because the Commission expressly rejected cost-based milestone standards in 2003

when it adopted the current milestone tests.42 Moreover, the Bureau itself had concluded in a

prior decision that continued monitoring of a licensee’s satellite construction progress in the

period between milestones is impermissible because doing so effectively imposes new and

additional milestone requirements.43

More fundamentally, to the extent the Bureau’s tests for milestone compliance are no

longer readily discernable from stated Commission decisions and policies or the Commission

intends to revise its policies, the FCC has a duty to inform those it regulates.44 Clear, announced

standards for milestone compliance are crucial in the context of satellite milestones because

various factors hinder the ability of satellite licensees to observe the bases for Bureau actions and

42
See Satellite Reform Order, at ¶ 207 (“We decide against replacing milestones with a
requirement that licensees spend a certain amount of money on the construction of their satellite
systems each year. . . . [M]eeting cost-based milestones would not necessarily show that the
licensee is progressing towards implementation of its system.”).
43
See Columbia Communications Reconsideration Order, at ¶¶ 7-18 (rejecting request that a
satellite licensee demonstrate in the period between its milestone deadlines that it continues to
make progress towards construction completion because such a requirement would impose new
license conditions retroactively).
44
See, e.g., Jelks v. FCC, 146 F.3d 878, 880 (D.C. Cir. 1998) (acknowledging that the FCC must
provide notice of changes in requirements for radio broadcast applications); Maxcell Telecom
Plus, Inc. v. FCC, 815 F.2d 1551, 1558 (D.C. Cir. 1987) (“[E]lementary fairness requires clarity
of standards sufficient to apprise an applicant of what is expected.”) (quoting Bamford v. FCC,
535 F.2d 78,82 (D.C. Cir. 1976)); see also In the Matter of Mobile Satellite Ventures Subsidiary
LLC, Order, 19 FCC Rcd 18133 (Int’l Bur. 2004) (reinstating dismissed application in light of
ambiguity regarding the two-degree spacing requirements); In the Matter contactMEO
Communications, LLC, Order and Authorization, 21 FCC Rcd 4035, at ¶ 35 n. 97 (Int’l Bur.
2006) (same).

12

decisions. Specifically: (i) milestone proceedings often involve only the licensee in question;

(ii) Bureau letters of inquiries are not published in the Commission’s Daily Digest;45 (iii) satellite

licensees often completely redact all material parts of their milestone compliance showing for

competitive reasons;46 and (iv) Bureau determinations that licensees have met milestones are

conclusory statements made in public notices with no explanation or analysis provided.47

For these reasons, the Bureau’s actions were improper. Combined with the delay in

confirming LicenseSub’s compliance with its earlier milestones, these actions exacerbated the

prejudice to the Company in attracting investment.

B. The Bureau’s ongoing failure to place the transfer of control
application on public notice after nearly six months is extraordinary
and has prejudiced LicenseSub’s ability to attract investment

LicenseSub recognizes that the uncertainty created by a business decision, such as

entering into an agreement for the transfer of control of a company and seeking regulatory

approval for such transaction, is not a valid justification for obtaining a milestone extension or

waiver.48 LicenseSub, however, is not contending that the pendency of its transaction has

45
Although parties could in theory participate in or monitor all such proceedings, as a practical
matter, doing so would be extremely onerous and burdensome.
46
See In the Matter of ATCONTACT Communications, LLC, Order, 25 FCC Rcd 7567, at ¶¶ 27-
29 (2010) (“ATCONTACT”) (relying on redacted information submitted in another milestone
proceeding as a basis for distinguishing a milestone compliance showing).
47
See, e.g., Public Notice Report No. SAT-00797, DA No. 11-1353 (August 5, 2011); Public
Notice Report No. SAT-00640, DA No. 09-2224 (October 16, 2009); Public Notice Report No.
SAT-00553, DA No. 08-2045 (September 5, 2008).
48
See, e.g., In the Matter of Application of Motorola, Inc. and Teledesic, LLC for Consent to
Assignment of Authority to Launch and Operate the Millennium Geostationary Fixed-Satellite
Service System, Memorandum Opinion and Order, 17 FCC Rcd 16543, at ¶¶ 11-21 (Int’l Bur.
2002); Columbia Communications Order, at ¶ 7.

13

created uncertainty, preventing it from moving forward with its plans.49 Rather, the Bureau’s

failure to take any action on the transfer of control application for nearly six months, in

combination with the Bureau’s other actions, has improperly created a cloud of uncertainty

regarding the validity of the LicenseSub’s underlying license.

LicenseSub submitted its transfer of control application nearly 180 days ago, and the

Bureau has yet to even place the application on public notice – a basic administrative step that

requires only the non-substantive determination that the application is complete in substance and

provides all the information required in the application form.50 The Bureau’s delay for such a

simple assessment is extraordinary. Indeed, a review of transfer of control and assignment

applications since 2008 shows that the Bureau, on average, places such applications on public

notice after only 43 days.51 Moreover, the only significant outliers were applications involving

transactions that potentially raised competitive concerns and required the release of a special

public notice and the creation of a separate docketed proceeding.52

49
See Satellite Reform Order, at ¶ 222 (“[L]icense purchaser will be required to comply with all
the rules applicable to the original licensee, including but not limited to milestones.”); see also,
e.g., In the Matter PanAmSat Licensee Corp., Memorandum Opinion and Order, 16 FCC Rcd
11534, at ¶¶ 13, 25 (Int’l Bur. 2001) (stating that allowing licensees to extend milestones by
filing modification applications would create a loophole in the milestone policy).
50
See In the Matter of Amendment of the Commission’s Space Station Licensing Rules and
Policies, Notice of Proposed Rulemaking, 17 FCC Rcd 3847, at ¶ 84 n. 103 (2002) (“[T]he
Bureau now reviews applications to determine whether . . . they include all the information
required by the Commission’s rules. The more detailed technical review is conducted after the
Bureau finds that the application is acceptable for filing and has placed it on public notice.”).
51
The analysis excludes pro forma applications, withdrawn or dismissed applications, and
applications that otherwise are not required to be placed on public notice.
52
See Application of ICO Global Communications (Holdings) Limited, et al. and Dish Network
Corporation, IB Docket No. 11-150, File Nos. SAT-T/C-20110408-00071, et al. (April 8, 2011);
Application of SkyTerra Communications, Inc. and Harbinger Capital Partners Funds, IB Docket
No. 08-184, File Nos. SAT-T/C-20080822-00157, et al. (August 22, 2008).

14

With respect to the transfer application here, there can be no such concerns given the

availability of 17/24 GHz spectrum.53 Indeed, the Bureau recently placed on public notice after

49 days a different transfer of control application regarding a 17/24 GHz band license filed by

essentially the same parties.54 Combined with the Bureau’s other actions, the Bureau’s ongoing

failure to place the transfer of control application on public notice has improperly prejudiced

LicenseSub’s ability to attract investment.

C. Grant of an extension or waiver would not undermine the
Commission’s policy objective to prevent speculation and spectrum
warehousing and would serve the public interest

The primary objective of the Commission’s milestone requirements is to prevent

speculation and spectrum warehousing, which precludes other entities from implementing their

own systems.55 Here, waiver or extension of the milestone would enhance rather than undermine

the Commission’s policy objective. LicenseSub has executed a valid satellite construction

contract with SS/L and completed CDR for the licensed system, as discussed above.56

LicenseSub also has actively pursued strategic partners to facilitate deployment of its licensed

system and has sought Commission approval for the transfer of control of the Company to

facilitate those efforts. Thus, there can be no doubt that LicenseSub has taken substantial steps

and intends to implement its system.

53
See infra Part I.C.
54
See File No. SAT-T/C-20111013-00201 (October 13, 2011).
55
See Satellite Reform Order, at ¶ 175; In the Matter of Amendment of the Commission’s Space
Station Licensing Rules and Policies, First Order on Reconsideration, 19 FCC Rcd 12637, at ¶¶
21-26 (2004) (“Satellite Reform Order on Reconsideration”).
56
See supra Part I.A.1.

15

Additionally, the recent surrender of several 17/24 GHz licenses by DIRECTV and

EchoStar, as a result of concerns regarding ITU priority, highlights the fact that there are orbital

locations available for assignment.57 Thus, grant of an extension or waiver of LicenseSub’s

commence physical construction milestone would not impair the ability of others to obtain 17/24

GHz band licenses.

LicenseSub believes that once the Commission lifts the cloud of uncertainty regarding the

Company’s satellite license, it will be able to obtain additional funding for its system, allowing

the Company to move forward expeditiously. Once implemented, LicenseSub’s satellite would

provide much-needed competition for video and broadband services.58 Accordingly, granting a

waiver or extension and allowing LicenseSub to complete its system, would better serve the

public interest than nullifying the license and having this spectrum lie fallow with no prospects

of development.

57
See Letter from Pantelis Michalopoulos, Counsel for EchoStar Corporation and EchoStar
Satellite Operating Corporation, to Marlene H. Dortch, Secretary, FCC, File Nos. SAT-LOA-
20020328-00050, et al. (May 24, 2011); Letter from William M. Wiltshire, Counsel for
DIRECTV Enterprises, LLC, to Marlene H. Dortch, Secretary, FCC, File Nos. SAT-LOA-
19970605-00050, et al. (July 27, 2011).
58
See In the Matter of The Establishment of Policies and Service Rules for the Broadcasting-
Satellite Service at the 17.3-17.7 GHz Frequency Band and at the 17.7-17.8 GHz Frequency
Band Internationally, and at the 24.75-25.25 GHz Frequency Band for Fixed Satellite Services
Providing Feeder Links to the Broadcasting-Satellite Service and for the Satellite Services
Operating Bi-directionally in the 17.3-17.8 GHz Frequency Band, Report and Order and Further
Notice of Proposed Rulemaking, 22 FCC Rcd 8842, at ¶ 1 (2007) (“By these actions, we
facilitate the introduction of new and innovative services to consumers in the United States and
promote increased competition among satellite and terrestrial services.”).

16

II. INDEPENDENT OF THE COMMISSION’S DETERMINATION
REGARDING LICENSESUB’S EXTENSION REQUEST, THE
COMMISSION SHOULD CONSENT TO THE WITHDRAWAL AND
UNCONDITIONAL RELEASE OF LICENSESUB’S SATELLITE
PERFORMANCE BOND

The Commission’s bond requirement was established over eight years ago as a

replacement to the financial qualifications requirement applicable to a satellite license

applicant.59 The original purpose of the financial qualifications requirement was to ensure that

licensees had the financial wherewithal to implement the proposed satellite system.60 In

establishing the bond requirement, the Commission stated that its “current financial qualification

requirements have not proven to be determinative of whether a licensee implements its

system.”61 According to the Commission, the bond requirement would “provide assurance that

the licensee is fully committed at the time its license is granted to construct its satellite

facilities,”62 expedite the provision of service63 and safeguard against speculation and

warehousing.64 The Commission also emphasized its belief that imposing a bond requirement

would “result in the financial community determining whether the licensee is likely to construct

and launch its satellite system,” rather than the Commission.65

59
Satellite Reform Order, at ¶¶ 161-72.
60
Id. at ¶ 161.
61
Id. at ¶ 164.
62
Id. at ¶ 170.
63
Id. at ¶ 167.
64
Id. at ¶ 170.
65
Id. at ¶ 167.

17

The industry’s experience over the last eight years, with respect to the 17/24 GHz band,

shows that the majority of these objectives have not been served by the bond requirement. While

the requirement arguably deters speculation and warehousing, there are ample Commission

requirements in place to address those concerns, and the availability of 17/24 GHz spectrum

suggests that further deterrence is simply not necessary. Moreover, in light of the current

economic crisis, the Commission should be doing all in its power to encourage applications,

which could lead to the creation of new businesses, services, and jobs. For these reasons, the

bond requirement should be eliminated, and the Commission should consent to the withdrawal

and unconditional release of LicenseSub’s bond requirement.66

A. Satisfaction of the bond requirement is not determinative of whether a
licensee implements its system

A fundamental premise of the Commission’s adoption of the performance bond

requirement is that a licensee’s ability to post a bond at the time of licensing demonstrates its

ability and commitment to proceed with its licensed system.67 However, this premise does not

comport with the commercial realities of the satellite investment process with respect to new and

untested frequency bands and services, such as the 17/24 GHz spectrum.

New satellite projects are inherently risky, involving technological and market

uncertainties. To attract the hundreds of millions of dollars typically required for investment in

such projects, a satellite entrepreneur often must first have an FCC license. New licensees also

need a reasonable amount of time to raise funding for the project. It is simply unrealistic to

66
Although the request is specific to LicenseSub’s 17/24 GHz license and associated bond, the
Company would support a decision by the Commission to initiate a rulemaking proceeding
expanding the scope of LicenseSub’s request.
67
Id. at ¶ 171 (“Again, the purpose of the bond is to require the licensee to commit at the time
the license is granted to construct and launch and satellite system.”).

18

assume, as the Commission does, that at an early stage of the process a licensee would be

financially able or committed to construction of a satellite.

Additionally, a satellite project may be subject to regular reevaluation throughout the

period of development of a satellite system. As recent evidence in the 17/24 GHz band shows,

licensees, and their investors, need to consider many factors, including changes in market supply

and demand, technology, and the development of adjacent satellites with higher International

Telecommunication Union (“ITU”) priority, in deciding whether to implement a satellite

system.68

Similarly, there is no basis for the Commission’s conclusion that the bond serves as “a

more accurate, market-driven determination of a licensee’s ability and willingness to proceed”

with construction of its satellite.69 A surety is not required at all to assess the likelihood of a

licensee’s ability or willingness to construct a satellite or otherwise evaluate a licensee’s business

plans. In fact, the only requirement to obtain a bond from a surety is being able to provide

collateral sufficient to cover the full amount of the bond in the event of default. Thus, the

68
See, e.g., Letter from Pantelis Michalopoulos, Counsel for EchoStar Corporation and EchoStar
Satellite Operating Corporation, to Marlene H. Dortch, Secretary, FCC, File Nos. SAT-LOA-
20020328-00050, et al. (May 24, 2011) (surrendering authorizations, in part, because other
administrations at or near the same orbital location may deploy actual satellites with higher ITU
priority); Letter from William M. Wiltshire, Counsel for DIRECTV Enterprises, LLC, to
Marlene H. Dortch, Secretary, FCC, File Nos. SAT-LOA-19970605-00050, et al. (July 27, 2011)
(surrendering authorization because other administrations at or near the same orbital location
may deploy actual satellites with higher ITU priority); Letter from Pantelis Michalopoulos,
Counsel for EchoStar Corporation, to Marlene H. Dortch, File Nos. SAT-LOA-20030827-00186,
et al. (March 9, 2009) (surrendering authorization given “the current condition of the capital
markets”); Letter from Pantelis Michalopoulos, Counsel for EchoStar Corporation, to Marlene H.
Dortch, File Nos. SAT-LOA-20040803-00154, et al. (September 2, 2009) (surrendering
authorization after making the business determination that “other orbital resources are better
situated for EchoStar’s stimulus projects”).
69
See ATCONTACT, at ¶ 51; see also Satellite Reform Order, at ¶ 167.

19

Commission is mistaken that the bond creates a “market-driven” assessment of a licensee’s

ability and willingness to construct a satellite.

Where a rule does not serve the purpose for which it was intended, the Commission has

recognized that it should be eliminated. Indeed, for this exact reason, the Commission

eliminated its satellite financial qualifications requirement in 2003,70 and it should eliminate the

bond requirement here, as well.71

B. Any benefit of the bond requirement in deterring speculative
applications and warehousing is outweighed by the impediment it
presents to satellite entrepreneurs seeking to develop the otherwise
fallow spectrum

1. The bond requirement imposes substantial costs on applicants,
greatly deterring entrepreneurs from pursuing the
development of the 17/24 GHz spectrum

The only objective that is arguably supported by the bond requirement is the

discouragement of speculative applications and warehousing. But, as the Commission has

recognized, the bond requirement has this effect only because it deters the filing of all

70
See Satellite Reform Order, at ¶ 164 (“Our current financial qualification requirements have
not proven to be determinative of whether a licensee implements its system. Our experience has
shown that financially qualified licensees have chosen not to go forward, while other licensee
who could not have met the requirement but were awarded a license because we waived the
requirement, have successfully built and launched systems.”). For the same reason and given the
unique facts presented here, any policy determinations made by the Commission in
ATCONTACT, which were premised on the validity of the bond requirement, should be
overturned, to the extent those determinations are inconsistent with the relief requested here.
71
See, e.g., In the Matter of Biennial Regulatory Review – Amendment of Parts 1, 22, 24, 27, and
90 to Streamline and Harmonize Various Rules Affecting Wireless Radio Services, Notice of
Proposed Rulemaking, 19 FCC Rcd 708, at ¶¶ 2-4 (2004) (“[T]he Commission is required to
modify or repeal any such regulations that are no longer in the public interest.”); In the Matter of
the 2002 Biennial Regulatory Review, Report, 18 FCC Rcd 4726, at ¶ 27 (2002) (the
Commission has “broad authority . . . to consider proposed modification to or elimination of its
rules” in the public interest).

20

applications, speculative or not, by substantially increasing the costs of pursuing a satellite

system.72

Aside from the fixed costs of maintaining a bond, which the Commission has estimated

to be approximately $60,000.00 per year, there is the opportunity cost of the assets necessary to

collateralize the bond, and the risk of default.73 These costs disproportionately impact new

entrants and those proposing new services in untested bands, like LicenseSub. Such entities are

generally thinly capitalized, have limited funding sources, and experience a higher cost of capital

than established satellite companies.74 New entrants are more likely to have new and unproven

business models and, accordingly, a higher risk of default.75

In its decision adopting the bond requirement, the Commission rationalized that the

impact of the bond requirement would be minimal or otherwise outweighed by the benefits of

discouraging speculative applications and warehousing.76 However, this is not true.

Since January 2008, there have been only three new license applications for 17/24 GHz

band spectrum, and only one applicant has elected to more forward with its proposed system.77

72
See Satellite Reform Order on Reconsideration, at ¶¶ 35, 42.
73
Id. at ¶¶ 31-35.
74
Id. at ¶ 35.
75
Id.
76
In support of that conclusion, the Commission analyzed the seven-month period between the
adoption of the bond requirement and the release of the Satellite Reform Order on
Reconsideration. The Commission noted that an insignificant number of entities, 3 of 11, had
chosen not to post a bond and surrendered their licensees, presumably as a result of the recently
implemented bond requirement. Id. at ¶ 44 (“The number of applications filed during this period
weighs against any conclusion that a significant number of parties have been discouraged from
applying for satellite applications.”).

21

For example, with respect to the 17/24 GHz band alone, the Commission’s bond requirement has

essentially frozen the use of $30 million dollars.85

C. Other Commission rules and requirements are sufficient to guard
against speculation and warehousing

Even assuming that there is a need to guard against speculation and warehousing in the

17/24 GHz band, which LicenseSub disputes,86 the Commission has in place numerous other

rules and procedures that adequately serve that purpose, including specifically: (i) limits on the

number of applications that can be filed;87 (ii) strict milestone requirements;88 (iii) “strikes” for

failing to implement a licensed system;89 (iv) requirements regarding substantial completeness of

satellite applications;90 and (v) restrictions regarding the transferability of pending applications.91

Additionally, as a practical matter, the administrative costs of simply filing an application for a

85
See Bond Submissions, File Nos. SAT-LOA-20020328-00050, SAT-LOA-20020328-00051,
SAT-LOA-20020328-00052, SAT-LOA-20070105-00001, SAT-LOA-20070105-00003, SAT-
LOA-20060908-00099, SAT-LOA-20060908-00100, SAT-LOA-19970605-00050, SAT-LOA-
20090807-00084, and SAT-LOA-20060412-00044.
86
See supra II.B.1.
87
47 C.F.R. § 25.159; Satellite Reform Order, at ¶¶ 229-230 (“[L]imiting pending satellite
applications is a reasonable way to limit speculation.”).
88
47 C.F.R. § 25.164; Satellite Reform Order, at ¶ 175 (“[S]trict enforcement of milestones will
help safeguard against speculative satellite applications.”).
89
47 C.F.R. § 25.159(d); Satellite Reform Order, at ¶ 200 (applying stricter numerical limit on
the number of pending applications for entities that have missed milestones in the past
“address[es] instances of warehousing” and “discourag[es] parties from applying for satellite
licenses regardless of their intent to proceed.”).
90
47 C.F.R. §§25.112, 25.150; Satellite Reform Order, at ¶ 244 (“[A]ny relaxation of the
requirement that satellite applicants submit substantially complete applications could encourage
speculative applications.”).
91
47 C.F.R. § 25.158(c); Satellite Reform Order, at ¶¶240-43 (“[A]llowing applicants to sell
their place in line would facilitate speculation.”).

24

Document Created: 2011-12-16 15:58:14
Document Modified: 2011-12-16 15:58:14

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